The money will be spent on advertising, portable toilets and the provision of marquees and tables and chairs, organisers say.

Hepburn Shire Mayor and Booktown committee member Tim Hayes said the festival was set to expand on its inaugural success.

"Booksellers have been knocking on our door wanting to participate. The 2008 Back to Booktown will be even better," Cr Hayes said.

Writer John Marsden will be among the authors who will attend this year's event from May 3 to 4. There will also be food, wine and live music.

During a speech at the funding announcement in Clunes on Friday, Cr Hayes acknowledged Hepburn Shire' s former chief executive officer Victor Szwed's contribution to Booktown.

"He has been a great supporter of Clunes. With Victor's departure we lose a great friend of Clunes," he said.

Ripon MP Joe Helper said: "Clunes is a dynamic and creative community and Back to Booktown is another wonderful example of this community's commitment to showcasing the very best that Clunes has to offer."

He said the funding, provided to Hepburn Shire through the Provincial Victoria Key Regional Events Program, was part the government's $502 million plan for regional Victoria.